Economics and Market Potential Model

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Market potential model

The market potential model is a model that’s used for analysing the market potential of a certain area. With the help of a market potential model we can make an estimate of the expected sales in a certain country and calculate if its financial attractive to invest or start a company in that country. There are a lot of different market potentials models. In this paper we will only discuss het marktschatting model.

Marktschatting model

This model looks at the market details of a particular country and assumes that these details are exactly the same as the country you are comparing with. An example of this is an estimate of the amount of fridges sold in Germany when knowing the amount of citizens of Germany. The formula will be as follow:

Xd is the demand for fridges in Germany.
Yd is the factor that correlates with the demand of fridges in Germany, the amount of citizens in Germany is 82 million. Xnl is the demand of fridges in Holland, estimate of about 800.000 a year. Ynl is the factor that correlates with the demand of fridges in Germany, the amount of citizens in Holland is 16 million.

Xd= (Xnl x Yd)800.000 x 82 million
------------------ = -------------------------------- = 4,1 million fridges sold in Germany
Yd16 million

The marktschatting model looks at the German market with the same eyes as the Dutch market and thinks both markets are the same regarding culture, consumers power, taste, prices, consumers patterns etc. This is a big limitation of the model and therefore this model can best be used when there is little data available to make a decent expectation of a certain market.

Using a market potential will be very helpful during our IBC project. With the help of the model we can calculate what the expected sales are in the UK and will help in making the final decision to start selling De Fietsfabriek bicycles in the UK.

DESTEP-analysis
De Fietsfabriek wants to investigate if there is a...
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